Linking Compensation and Performance Management
Part 4 of a 5-part series on how to build a compensation strategy for your company that balances corporate goals and industry shifts, supports business strategy and ensures pay transparency.
Performance Impacts Pay
Previously, we covered compensation principles that help ensure your company’s pay strategies produce the results required and shared an example you compensation policy statement. Here we discuss the vital connection between pay and performance.
The overarching goal of the compensation strategy is to ensure an organization has allocated the money necessary to motivate the performance needed to achieve the business strategy. To that end, compensation should also tie into the overall performance management strategy.
Your practices must therefore be understood by employees and based on hard, objective data. It is essential to maintain an approach in which equal pay is given for equal work. These critical objectives can be achieved by:
- Standardizing pay practices and basing the compensation system on benchmarks
- Achieving internal parity
- Providing competitive hiring scales
- Reformatting or rewriting job descriptions
- Creating a meaningful performance management tool
Write results-oriented job descriptions
Many companies find it beneficial to rewrite their job descriptions to include more results-oriented and measurable information. Instead of simply including the specific tasks or duties of the job description, consider adding why the duty is performed, or which results it aims to achieve, and how the performance will be measured.
For example, for the marketing director role in an assisted living facility, the roles and responsibilities might look like this:
- Facilitate the move-in process to build relationships with new residents. Metric: New resident satisfaction
- Ensure respite apartments are ready to show to ensure marketability. Metric: Apartment turnover
- Develop and maintain a detailed marketing plan to great market share. Metric: Competitive market data
In the final part of this series, we’ll discuss communicating and maintaining your company’s competitive pay philosophy.